S. P.

Jain Institute of Management & Research

Post Graduate Program in Management
Information Management
2009

Telecom Sector in India

Business Environment Domain Study Presentation
20th Nov 2009

Anjana Rao, Prachi Joshi, Puneet Taneja, Sandeep Sreenivasa

 Agenda
History, Facts

GoI, Regulatory Bodies

Spectrum Action

India Advantage

VAS

Industry Updates, Trends

Future Technologies

Conclusion

BE - Domain Study - Telecom 2

History, Facts

GoI, Regulatory Bodies

Spectrum Action

India Advantage

VAS

Industry Updates

Future Technologies

Conclusion

BE - Domain Study - Telecom 3

 History of Telecom in India- I
Merger of ETC &IRT to form
First Military Landline from Merger with the Postal service (IRCC) Indian Radio Telegraph
Fort William to Lalbazaar Cable Company
(Calcutta ) by the British Govt

1851 1881 1883 1923 1932 1947

First Civil landline service

introduced for the British Formation of Indian Radio Formation of Posts Telephone
Viceroy and his team Telegraph Company (IRT) & Telegraphs under Ministry of
Communication

BE - Domain Study - Telecom 4

 History of Telecom in India- II
•1st call on Mobile phone
DOT established separate •Telecom Minister Sukh
from Postal system Ram(Delhi) to Jyoti Basu
(Calcutta)
•Cellular service For 3 months in a row
launched. India beats China for
•New Telecom the maximum subs
Policy(NTP) is adopted added every month

1985 1986 1995 1997 1999 2000 2009

DOT spilt into 3 :

TRAI created
•MTNL (metros) DOT becomes a corporation =
(Telecom Regulatory
•DOT (others) BSNL
Authority of India)
•VSNL (International)

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 Quick Facts
Total telecom subscribers : 509 million (Sep 2009)

Wireless subscribers : 471.7 million

Wire line subscribers : 37.3 million

Tele density : 43.50 per cent

India’s service providers revenue in Q1 (2009): $8.2 billion

India’s Rural Mobile Phone Users : 100 Million

Source: TRAI report – Nov 2009

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 Growing Numbers
Revenue(US$ billion)
Revenue(US$ billion)

43

32

20
15
10 11
9

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 Telecom Companies ? Bharti-Airtel,
WTTIL, Tata teleservices Vodafone, Idea, Relia
Nokia, nce, Tata Teleservices
Motorola, tower, QTIL
Samsung,
LG,
Sony Ericson

ARM,
Texas Instruments, IBM, Wipro,
Qualcomm, Aricent,
Infineon Tech Mahindra
Symbian, Google

Infinera, Cisco,
Alcatel Lucent, Nokia
Siemens, Huawei
BE - Domain Study - Telecom 8
 Market Share
Service Provider Market
5% 1%1% Bharti Airtel
10% Reliance Communications

23% Vodafone Essar

As on 30th Sep ‘09
BSNL

11% Idea Cellular

Tata Teleservices

13% 18% Aircel

MTNL

18% Others(Loop, MTS)

Net additions in Sep 09

Tata (26.74%) > Bharti (16.78%)

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 Handset market
India

5% Nokia
15%
6% Sony
7% Samsung
60%
8% Motorola
LG
Others

Worldwide
Nokia
20%
37% Sony
11%
Samsung
Motorola
22%
5% LG
5% Others

Source: IDC Press Release

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 Growth Avenues
Enterprise 3G
Telecom Services

Rural
Telephony Growth WiMax
Avenues

Infrastructure
Value Added
Sharing
Services

Virtual Private Managed Services

Network

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 Urban-Rural Telephony
Population Subscription
Contribution Contribution

15-20% 80-85%
Urban India

72% Rural India 28%

BE - Domain Study - Telecom 12

History, Introduction, Facts

GoI, Regulatory Bodies

Spectrum Action

India Advantage

VAS

Industry Updates

Future Technologies

Conclusion

BE - Domain Study - Telecom 13

 Strategic Flow
 500 Mn Mobile and Wire line subscribers in India today
 Rs. 40,000 Crore quarterly revenue figures for this industry

Clear
Policy
So How all this happened?

Cheap tariff
Competition
regime
TRAI functions

Consumer
Protection

Ensure Quality of Service

Ensure Affordable Tariff

Regulate Interconnections

Regulation, Directions, Orders

Recommendations

BE - Domain Study - Telecom 15

 Agenda
History, Introduction, Facts

GoI, Regulatory Bodies

Spectrum Auction

India Advantage

VAS

Industry Updates

Future Technologies

Conclusion

BE - Domain Study - Telecom 16

 Spectrum Allocation
Need for Spectrum Allocation
• Spectrum auctions ensure the efficient use of spectrum by
allocating it to those entities that value it most, while also
generating revenues for governments.
• In order to allocate spectrum amongst competing service
providers, regulatory agencies often use auctions.

• The key challenge before regulatory agencies is to design

auctions in such a way as to foster competition while at
the same time ensuring that bidders can effectively use
the spectrum for their business.
Spectrum Allocation in India
o
o
• In India, telecom licences were auctioned
for basic and cellular services from 1991 by
the Department of Telecom (DoT).
• The entire country was divided into roughly
20 circles, categorized as A, B, or C
Circles depending upon their revenue potential.

• Required to seek Foreign partners.

• For cellular licences, Global System for
Mobile Communications (GSM) was the
chosen technology and for basic services, a
combination of fiber optic and wireless in
GSM&WLL the local loop (WLL) was selected.
 Agenda
History, Introduction, Facts

GoI, Regulatory Bodies

Spectrum Auction

India Advantage

VAS

Industry Updates

Future Technologies

Conclusion

BE - Domain Study - Telecom 19

 India’s Competitive Advantage

1. Fastest growing free market democracy

2. Cost advantage in product development and back office processing
3. Stable economic outlook – Decade long reforms
4. Huge market potential – one of the largest consumer markets
5. Large talent pool

Source: www.telenor.com BE - Domain Study - Telecom 20

 -Intensive competition in the
country has made it possible for
service providers to offer the
services with lowers fare in the
world, profitability,
-Many new handset have been
launched.
Chance
Factor Conditions
-Presence of skilled labour pool.
-Rapidly developing robust
telecom infrastructure.
-Increasing disposable income of
consumers.
-Increasing demand due to
changing lifestyles and growing
attraction for mobiles with new
features.
Source: IBEF Report
Porter’s -India has a large middle class of
300 million,
Diamond Model -Growing affordability and lifetime
free schemes have care a market
at the bottom of the pyramid.
-Teledensity (~43.5%) offers huge
Firm strategy structure future potential.
and rivalry.
Demand conditions
-The government extends full
support to industry through
reform processes.
- Policies are in place to safeguard
the interests of service
Related and supporting providers, as well as those of
industries Government consumers.
-Competent handset manufacturers have produced the lowest priced
handsets for the Indian market.
-Handset players are setting up manufacturing bases in India for better
operation management.
-Many telecom and equipment and software companies are based in India.
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 FDI in Telecom Sector
Third largest sector to
attract FDI in India

FDI in Telecommunication Sector (US$ million)

2008-09 2345.38

2007-08 1275.65

2006-07 521

2005-06 680

2004-05 129

2003-04 116

Source: IBEF Report BE - Domain Study - Telecom 22

 Agenda
History, Introduction, Facts

GoI, Regulatory Bodies

Spectrum Auction

India Advantage

VAS (Value Added Services)

Industry Updates

Future Technologies

Conclusion

BE - Domain Study - Telecom 23

 VAS (Value Added Services)
SMS
VAS services, Bulk Messaging, B2B and B2C

Voice IVR
Mobile Radio, Voice chat, English Learning, Devotional
and Astrology, Music on Demand

Content downloads
Mobile WAP Portal
Consumer Applications
Enterprise solutions : Mobile CRM, Mobile SFA

CRBT (Caller ring back tones)

USSD
Message along with *141#
Flash alerts
VAS offerings

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VAS market in India

VAS: Not a form of basic service but adds value

to the total service offering

Contributes to 10% of total revenue from

telecom operators

The corresponding figure in developed nations

is ~25%

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 Present Segments
Population of India – 1,130 mn

Mobile Subscriber Base – 509 mn

GPRS Enabled – 70 mn

GPRS Activated – 17 mn

GPRS Users – 10 mn

Source: IAMAI Report BE - Domain Study - Telecom 27

 Why mobile VAS ?

Decrease in ARPU for telecom operators

Very low operating margins

Decreasing call rates: Lowest in the world @ 1p/sec

Increase in number of operators in each circle

Saturation in metro market: Over 100% tele-density in 4 metros

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 VAS value chain

Content Generators Content Aggregators

Telecom Operators
Eg. Music Companies, Website Eg. Spice
Eg. Airtel, Vodafone, Idea, BS
portals Digital, Hungama.com, Mauj.com

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 Rural VAS
Only 12% tele-density in rural areas as compared to 72% in urban areas

Huge market potential

Sachet model of VAS promotion

Localization content
• Local Mandi Rates
• Weather forecasts
• Health and job related information
• Train services

BE - Domain Study - Telecom 30

 Agenda
History, Introduction, Facts

GoI, Regulatory Bodies

Spectrum Auction

India Advantage

VAS

Industry Updates

Future Technologies

Conclusion

BE - Domain Study - Telecom 31

 Industry Updates
Idea Cellular’s Acquisition of Spice Telecom

• Idea acquired 40.8% stake of Spice Communications at Rs 77.30 a share for Rs 2,716 crore. There
was a share swap in which Spice shareholders got 49 Idea shares for every 100 Spice shares
held.

Vodafone’s entry into India

• Vodafone paid a discounted price of $10.9 billion in cash for acquiring the
52% stake held by Hutchison Telecom International (HTIL)

Telenor-Unitech Deal

• Telenor is in the process of acquiring controlling stake of 67.25% in Unitech

wireless via equity infusion

TTSL – DoCoMo Deal.

• Japanese carrier NTT DoCoMo acquired 26 per cent stake in Tata Teleservices
(TTSL).

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 Bharti-MTN deal
To create a $61-billion
Reasons for failure -
transnational telecom Takeaways for Bharti
Dual listing
goliath.
• Combined revenues • Access to new • Indian rupee is not
of $20 billion geographies with fully convertible
• Over 200 million high growth • Not possible to go in
subscribers across potential. for dual listing of
Africa, Asia and • Greenfield shares.
Middle East. project, time- • which allows people
consuming and to buy shares in the
capital intensive. stock exchanges of
one country and sell
in the bourses of the
other country

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 India 3G Story

DoT looking to hike the reserve price for the auctions of

In India, 3G mainly for voice?
the pan-India 3G spectrum
Indiatimes - Sep 8 2008
TopNews - Jun 12 2009
India 3G kicks off; but at what cost?
CIOL - Jan 16 2009 India 3G auction may happen sooner than expected
India 3G News: BSNL flips the switch Telecoms.com - Aug 27 2009
Product Reviews - Mar 5 2009
SK C&C, Reliance team on India 3G roll out
EE Times India - Oct 20 2009
Source: Google Trends 34
BE - Domain Study - Telecom
 Jan 14th 2010
• 3G – Rs 35 bn
Reserve Price • WiMax – Rs 17.5 bn
• EVDO – Rs 8.25 bn

• 2-3 times the reserve prices - to total at

Expected Bid least Rs65bn–Rs120bn.

• with no current presence in India have to

Foreign players pay an additional Rs 16.50bn for 2G
spectrum.

• relaxing the normal US$500m limit on

ECB external commercial borrowings

BE - Domain Study - Telecom 35

 Agenda
History, Introduction, Facts

GoI, Regulatory Bodies

Spectrum Auction

India Advantage

VAS

Industry Updates

Future Technologies

Conclusion

BE - Domain Study - Telecom 36

 Mobile Number Portability(MNP)

The Inhibitors
Huge Costs Infrastructure Upgrade
Customer Retention/Increased Cost Recovery and Bill
Competition Reconciliation/Query Processing

Source: Voice and Data BE - Domain Study - Telecom 37

Mobile Virtual Network Operator
• Operator or company which does not own a licensed spectrum and
What ?
generally with out own networking infrastructure

• MVNOs resell wireless services under their brand name, using regular
How ?
telecom operator's network.

• Deploy their own mobile Intelligent Network (IN) infrastructure in order to

facilitate the means to offer value-added services.
Differentiation
• The goal is to differentiate versus the incumbent mobile operator, allowing
for customer acquisition.

• MVNO's have full control over the SIM

Marketing
card, branding, marketing, billing, and customer care operations.

• MVNOs have not been regulated in any country.

Regulation
ITU has received several requests to study the issue

BE - Domain Study - Telecom 38

 Wimax v/s 3G
3G WiMax Result
Spectrum Price To be auctioned DoT has Advantage WiMax
recommended
25% of reserve
price of 3G
spectrum

Spectrum Allocation Simultaneous Simultaneous Neutral

For Voice services Best technology Evolving Advantage 3G
technology
Equipment/Standard Evolved over the years New technology Advantage 3G

Data download speeds 15 Mbps 70 Mbps Advantage WiMax

(fixed)
Data download speeds 15 Mbps 20 MBPS Advantage WiMax
(mobile)

Source: Business Standard BE - Domain Study - Telecom 39

 Generations

4G
10MBPS TO
3G 20 MBPS
600KBPS TO
2MBPS
2g
DATA RATE
14.4

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 4G
• MIMO (multiple input multiple output)
• Worldwide Interoperability for smart antenna
Microwave Access • OFDM
Wi Max • IEEE 802.16e STANDARDS • 10 To 80mbps
• BROADBAND EVOLUTION • Sprint, Clearwire, Comcast,
(e not d) • Motorola / Lucent
• Rev m is the future
• Small investment

• MIMO
• Long term evolution • OFDM
• 3GPP • 20 to 100mbps
• 80% • Revision 8 future is rev 10
LTE • MOLILE EVOLUTION • Vodafone/A&T/France Tele
• Nokia & Ericsson
• Large investment

BE - Domain Study - Telecom 41

 Agenda
History, Introduction, Facts

GoI, Regulatory Bodies

Spectrum Auction

India Advantage

VAS

Industry Updates

Future Technologies

Conclusion

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SURFING AGAINST

Top Ten Challenges

 Sustenance of same EBITDA
 Competitive tariffs
 VAS applications on Device
 Spectrum management
 Broadband expansion in Rural
 Transition to NGN
 Content Regulation of Data
 Ecosystem to facilitate M&A
 Reduce Circles to relax Roaming
 Alternate Technologies (Solar/Wind
for power back-up)
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 Road Ahead
People with and without mobile connections (in millions)
Not Connected Connected

604 Highest Number

661
Not Connected
People

720
510 36
91 25
271 71
140 165 96

China India USA Indonesia Brazil Pakistan

54.4% 43.6% 88.4% 60.5% 86.6% 57.6%

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 References
1. Trai – Quaterly Report (Nov 2009).
2. IBEF report 2007-08 : Telecommunication - MARKET & OPPORTUNITIES.
3. Cellular Statistics – Cellular Operator Association of India
4. IAMAI & eTechnology Group@IMRB: MOBILE VALUE ADDED SERVICES IN
INDIA- A Report.
5. Telenor Entering India: Investment Update
6. Voice and Data(May 2009): Mobile Number Portability - Poaching with
Portability.
7. Business India : Telecom Takeover, Bharti-MTN deal

Thank You for Your Attention !

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